Thanksgiving, Anno 1999
A DR Classique, first run November 25, 1999
I turned to my trusty assistant…Beirne White…this morning. "Beirne," I said gravely, "tell me about Thanksgiving in Mississippi." Beirne proceeded to tell me about a Mississippi bluesman named "Son" House, who lived to be 102 by doing what bluesmen tended to do…chasing bad luck, bad liquor, and bad women.
"What does that have to do with Thanksgiving?"
"Nothing," he replied…whereupon he drew on the resources generously provided by Britannica.com, formerly of Chicago, lately of cyber space, to get me the research I requested.
Beirne hails from Mississippi. And while Mississippians will sit down with the rest of the nation…and tuck into their turkeys with equal relish…perhaps only substituting Bourbon Pecan pie for the sweet potato or pumpkin pie enjoyed in Maryland…somewhere deep in the most primitive part of his medulla oblongata, the part of the brain where race memories are stored, Beirne resists Thanksgiving. It is, after all, a Yankee holiday.
In the middle of the war between the states, both sides proclaimed days of "thanksgiving," following the progress of the war as we now follow the progress of the stock market. After each of the first and second battles of Bull Run, which sent the Yankees fleeing back to Washington, the Confederates proclaimed days of thanksgiving.
But it was Lincoln’s day that stuck. Declared after the battle of Gettysburg – the last great Napoleonic charge of military history – Thanksgiving was set for the third Thursday in the month of November, commemorating the Northern victory.
Beirne doesn’t say so…but this fact must stick in his craw. It doesn’t help that the original celebration took place in Massachusetts. And that it was hosted by a dour bunch of Puritans, who probably wouldn’t have been able to enjoy a good dinner if their lives depended on it. But they certainly had a lot to be thankful for. As the Wall Street Journal reminds us annually, they nearly exterminated themselves in typical Yankee fashion – by wanting to boss each other around. They had arrived in Massachusetts by accident and bad seamanship, intending to settle in the more hospitable climate of Virginia, which had been colonized more than 10 years before.
Once in Massachusetts, they proceeded to set up such a miserable community that surely most of them, had they lived, would have longed to return to England. The Soviets could have learned from their example and spared themselves 70 years of misery. Only after the "witch burners and infant damners" abandoned their communal form of organization, and allowed people to work for themselves, did the colony have a prayer of survival. But victors write the history books. And now this precarious celebration by a feeble group of religious zealots has turned into the most American holiday.
After Appomattox, the South was helpless. Its natural leaders, the plantation aristocrats, were either dead, bankrupted and/or discredited. Many of them went to Northern cities, like New York or Baltimore, where, Mencken tells us, they "arrived with no baggage save good manners and empty bellies." They enriched the North. But back home, they were sorely missed. "First the carpetbaggers," says Mencken, "ravaged the land…and then it fell into the hands of the native white trash…"
Scars of war can take a long time to heal. But 130 years later, the South is the most economically and culturally robust part of the nation.
Thanksgiving was declared a national holiday in 1931. Through the Depression, and then WWII, Thanksgiving grew in importance. In a country where roots meant almost nothing, where people were ready to pick up and move at the drop of a hat, where there were huge differences in what people thought and how they lived, Thanksgiving served to provide a unified, national myth…most popularly expressed in Norman Rockwell’s Thanksgiving cover for the Saturday Evening Post.
Roots mean more in Mississippi than they do in California. "No man is himself," said Oxford, Mississippi’s most celebrated alcoholic, "he is the sum of his past." Unlike so many other American writers of the 20th century, Faulkner stayed home. The forward to the "Encyclopedia of Southern Culture" has a passage from Faulkner, saying: "Tell about the South. What’s it like there. What do they do there. Why do they live there. Why do they live at all."
Even in Faulkner’s Mississippi…Thanksgiving is now part of everyone. Where Beirne goes…it goes too. And so, all over the world, Americans, gathering in small groups, like pilgrims on distant shores, celebrate the holiday (if not on the actual day…perhaps the weekend before or following…as we do.)
Art Buchwald has translated the Thanksgiving story for the French, deftly turning Captain Miles Standish into Le Capitaine Kilometre Deboutish. But no one has refashioned American Thanksgiving recipes for the metric measuring cups and local ingredients here in France. Americans have to use their yankee ingenuity to find substitutes. Pumpkins are hard to announce – citrouilles – and hard to find. Cranberry sauce is almost unknown. My wife, Elizabeth, descendant of the Puritan fathers and former resident of New York…does her best.
And we are thankful.
November 28, 2002
Stocks went up like a house afire yesterday.
And why not? The economy is growing at a 4% rate. Consumers are still spending. Houses are still selling. People are losing fewer jobs. Prices are still rising and the dollar is still worth more than it has any right to be.
Well…what can we say? The end-of-the-world-as-we-have- known-it…or EOTWAWHKI, for short…has been postponed.
Stock market investors are buying stocks ‘for the long haul’ again. Bob Prechter wonders why, "when 20 years ago they were clutching T-bills." Why didn’t they favor stocks for the long haul when the long haul was about to really pay off?
Prechter found his answer in a 1917 book, One Way Pockets, in which the author, a stockbroker, noticed that his clients were always traders at a market bottom. At tops, they were investors, buying for the ‘long haul.’
How then will we know when stocks reach a real bottom? People will no longer be investing in them; they’ll be trading them, careful not to hold too long for fear they will suffer a terrible loss.
We are a long way from a bottom now – and seem to be headed in the wrong direction. Stocks, already too expensive for a sober man to buy, are becoming more expensive. And those that are becoming most expensive, most quickly are those that are most likely to give investors the terrible loss they seem to be looking for – the old New Era wrecks. Techs, telecoms, semiconductors, biotechs and even banks rose smartly yesterday. The incredible hulks seemed to have come to life all of a sudden…and for no apparent reason.
Why would anyone want to buy the banks, for example? Yesterday brought news that the banks were writing off 35.6% more bad credit card debt than they did the year before. Given the huge rise in consumer debt over the last 2 decades, banking would seem to be an industry to sell, not buy. As a percent of personal income, U.S. household debt has risen from less than 60% in 1982 to nearly 90% last year, according to Fed figures. Total U.S. non-financial debt as a percentage of GDP has jumped from 140% to almost 200% in the same period.
But what do we know? When the EOTWAWHKI finally arrives, the banks will be one of the last stocks you’ll want to own. But who knows when that will happen?
In the meantime, it’s a national holiday and life as we have known it for the last 20 years continues. We’re not going to spoil it by making you worry about something that might not resume until Monday, or a couple of weeks, or even months from now. And, even though we are hard at work here in the Paris office of the Daily Reckoning, our hearts are with Americans everywhere who gather together to celebrate and give thanks.
Mr. Fry in Manhattan…
– The traditional pre-Thanksgiving short squeeze occurred right on cue yesterday. It’s as much a tradition as roast turkey and cranberry sauce. The pre-Thanksgiving ritual on Wall Street goes like this: most traders take off from work Tuesday afternoon, not to return until the following Monday. Therefore, trading volumes are much lighter than normal, which permits the few folks that do remain to make a big impact on prices with just a little bit of buying. It’s all just good clean sport and nobody gets hurt, except for short- sellers…and who cares about them anyway?
– The Dow gained 255 points to reach 8,931, while the Nasdaq jumped 3% to 1,488. The dollar gained a little and gold slipped a little.
– On Tuesday, investors responded to the good news of stronger-than-expected GDP and rising consumer confidence by SELLING stocks. Yesterday, they did just the opposite. They responded to a spate of encouraging economic news by BUYING stocks. Durable orders rebounded 2.8% in October, and the Chicago Purchasing Managers’ Index jumped to 54.3 from 45.9.
– Will yesterday’s rally be the coup de grace of this particular bear-market rally? If so, the bulls should be very proud of what they have accomplished. Since October 9th, the Dow has jumped more than 22% and the Nasdaq has gained a sparkling 33%.
– "Even though recent market history has taught, or SHOULD HAVE TAUGHT, investors a painful but valuable lesson about bear market rallies," Apogee Research observes, "a slew of them have embraced the latest rally with unbridled enthusiasm…We are in favor of better times, but various contrarian indicators of bullish sentiment are flashing ‘caution!’"
– Apogee notes that option volatility indexes like the VIX, which measures implied volatility on the S&P 100 options, are flashing signs of extreme complacency. That’s the type of signal that often precedes market sell-offs.
– Furthermore, my friend Kevin Duffy of Bearing Asset Management tells me a recent Investors Intelligence poll shows that the percentage of bearish advisors has reached 24.7%, the lowest reading since the 23.2% of March 2000 – the infamous date that marked the very top of the 1990s epic bull market. "This poll shows way too much optimism for this seven-week rally," says Duffy. "While we can’t rule out more gains – which would take these indicators to even greater extremes – this rally appears to be running on borrowed time."
– For the counter-argument, let’s turn to portfolio manager Ronald Baron. "This is your opportunity to get rich," Baron told the Wall Street Journal recently. "You shouldn’t be able to sleep at night; there’s so many things to do." Baron may well be correct. But it begs the question: if NOW is the opportunity to get rich, why was he so heavily invested in stocks two years ago? You see, Baron’s $3.15 billion Barron Asset Fund fell 10.1% in 2001 and has dropped about 20% more so far this year.
– Baron could be right that NOW is the opportunity to get rich. But first, his investors will have to recover the money they’ve lost from BEFORE, when he was loading up on stocks during the time when it was a great opportunity to become poor…
– Pity the poor bond market. Now that stocks are popular once again, nobody seems to want bonds anymore. What fun is a 4% ANNUAL yield when you can get two or three times that return in a single day by buying any one of a number of tech stocks? Yesterday, the 10-year Treasury tumbled more than a point, causing its yield to rocket to 4.25% from Tuesday’s 4.06%.
– But what may be misery for bond investors should be sheer delight for the subscribers to the Resource Trader Alert. On November 13th, the Resource Trader recommended buying put options on the 10-year T-note. The options have jumped a sparkling 105% since then. (see: Resource Trader Alert )
– Of course, it’s hard to blame the folks who are selling bonds. The apparition of deflation that so many folks believed to be real has suddenly vanished. In its place stands the imposing – albeit faint – outline of a looming inflation. What’s more, Alan Greenspan’s razor-thin interest rates and double-digit money-supply growth provide little reason to doubt that inflation’s faint outline will eventually become much more visible.
– Happy Thanksgiving!
Back in Paris…
*** "Debt + no job = bankruptcy." Thus does the San Francisco Gate do the equation for us. People owe so much that they cannot afford to take a unplanned vacation. For many people, the revenue that will pay next week’s bills comes in on Monday or Tuesday. For others, it doesn’t arrive until the week after. And for a few – but more and more – it doesn’t come at all. They’ve been laid off and are having a hard time finding new work. In the meantime, the mortgage they just refinanced needs to be paid – along with life’s other necessities.
*** Here’s something interesting. "Art is very much in again," Barron’s quotes a London-based private banker. But, think you can beat stocks with art? Not necessarily. People who buy art as an investment get about what other people who invest get – usually, about what they deserve. When he was still at liberty, former Tyco Dennis Kozlowski went on a buying spree of big-name art. The Monets and Renoirs were supposed to give the world the impression that the man had culture as well as money. But as we keep saying, money is not the key to culture, nor to quality. And a fool who goes out and buys ‘art’ for investment purposes is as quickly separated from his money as one who buys tech stocks.
When the paintings are sold to cover the unpaid NY sales tax, "some experts think they’ll fetch just 50 cents on the dollar, based on what Kozlowki paid," Barron’s reports.
And when the British Rail Pension Fund finally figured out what it had made on the $60 million it invested in art between ’75 and ’80, it discovered that the return was only 4% per year – far less than its other investments during the same period.
Nor is art immune to the booms and busts that episodically visit other markets. Monet’s "Nymphéas", for example, was sold by Christie’s on Nov. 8, 1999 for $22.60 million. Three years later, it brought only $16.83 million.
And ‘modern’ art does even worse than old masters – unless you get really lucky.
"Concept Art," explained my friend Michel at lunch, "is one of the biggest marketing success stories of all time. You put a fork against a white background and you call it something like ‘Destruction of the Ego’ and it could sell for millions of dollars – or for nothing.
"And then, the professors of art history in the universities can’t tell the difference between this ‘concept art’ and real art. So they watch the prices…and treat the two of them as though they were the same. So, the concept art enters the academies and the galleries…and gets picked up by the museums. After a while, the whole world seems convinced that this garbage is worth something. The artists are put on the same level with Rembrandt, even though many of them wouldn’t know a paint brush from a toilet brush."
*** With that, your editor heads out the door. He is on his way to the famous auction house, Drouot, where he will buy art the way he buys stocks: cheaply. He will place low bids on unknown paintings by second- and third-rate 19th-century French landscape artists. With a little luck, his guests will enjoy seeing them on his walls…and his heirs will at least recover what he paid for them when the time comes to sell.